Relating to Real Estate
Value of a Federal Subsidized Lease Includes Considering the Tenant's Life Expectancy
In Kirk v. Hilltop Apartments, LP, 225 Md. App. 34 (2015), the Court of Special Appeals held that federal subsidized leases containing automatic renewal provisions are of indefinite length, and therefore to calculate the value of the lease the monthly rent is to be multiplied by the tenant’s remaining expected life.
Hilltop Apartments sued LaShaun Kirk in district court to terminate her Section 8, federally subsidized lease, alleging numerous defaults. Kirk moved to have the case tried in circuit court, and there she prayed a jury trial. To do this, the amount in controversy must be more than $15,000.
Hilltop asked the circuit court to return the case to district court because the fair market value of the lease times the number of months until the end of the stated lease term was less than $15,000. The Circuit Court agreed, but on appeal the Court of Special Appeals reversed.
Kirk’s lease provided that it automatically renewed for successive one year terms, unless terminated for good cause. Kirk cited Carroll v. Housing Opportunities Commission, 306 Md. 515 (1986), and Cottman v. Princess Anne Villas, 340 Md. 295 (1995), to support her basis for calculating the amount in controversy, which would be the monthly fair market value of the lease times the number of months of her remaining expected life. This would be an amount greatly in excess of $15,000. Hilltop argued that Carter v. Maryland Management Co., 377 Md. 596 (2003), overruled the cases Kirk cited. In Carter, the Court of Appeals held that for the type of lease in question, the provisions of the old law that provided for continuing leases were replaced with the requirement that such leases be consistent with leases generally used in the community; such leases were for fixed periods of time.
The Court of Special Appeals disagreed with Hilltop's position. The court stated that Carter discussed a lease for a federally subsidized tenant, and that lease did not have a clause that automatically renewed the lease every year. Kirk’s lease was drafted to be used in a federally subsidized project. Because Kirk’s lease had an automatic renewal clause in it, Carroll and Cottman controlled, and the value of Kirk’s leasehold exceeded $15,000. Kirk was, therefore, entitled to a jury trial in circuit court.
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